21 September 2016

Eric Goldman Clearly Received An Elite Kindergarten Experience

“The California appeals court said Yelp had no standing to protest an injunction against it,” [Law Professor Eric] Goldman said. “That contradicts basic due process that we learned in kindergarten. Yelp was ordered to do something without ever having a chance to tell the court its side of the story.”

Eric Goldman is the leading scholar of reputation law in the digital age and his blog is in the sidebar at this blog.

Perhaps he gained such an esteemed position because of the excellent education he received in kindergarten. I, in contrast, was trying and failing to learn how to color between the lines, and learning the alphabet and how to count to ten. But, some people, like the nine year old starting college this year, are more precocious than I was.

Perhaps the federal government can hire him as a witness for the government in its immigration cases where it has argued that young children are capable of representing themselves in immigration court without offending due process considerations. (I believe that a later decision in the case found against the government, although only on a preliminary matter like class action certification.)

The Merits

In all seriousness, the issue presented is whether Yelp has standing to contest a finding that a customer review posted by a user is defamatory in a proceeding to have an injunction put in place to order Yelp to remove it, when a default judgment against the user who posted the review was obtained by a business which claims to have been defamed by the review.

Generally speaking, default judgments cannot be used as proof in another case against anyone other than the person against whom they were entered (and not always then) under the doctrines of collateral estoppel and res judicata. So, Yelp would not even have to prove that the court entering the judgment had jurisdiction to enter the judgment (which mostly boils down to whether there was valid service of process on the user who may or may not have been accurately identified by the business).

UPDATE September 22, 2016: This majority rule of law, however, is apparently not the law in the State of California. The California Court of Appeals states in a footnote to its opinion that:

A “‘“default judgment conclusively establishes, between the parties so far as
subsequent proceedings on a different cause of action are concerned, the truth of all
material allegations contained in the complaint in the first action, and every fact
necessary to uphold the default judgment.” ’ [Citations.]” (Gottlieb v. Kest (2006) 141
Cal.App.4th 110, 149.)

It isn't entirely clear if this language means that a default judgment as to one theory in one lawsuit against a defendant also applies with respect to a different theory in the same lawsuit against the defendant (a majority rule), or if facts admitted by default in one lawsuit can also be held against that defendant in a second lawsuit (a minority rule). However, it appears that only one lawsuit was filed in this case.

Even on its face, however, this rule of law should only bind the defaulting defendant and not someone who was not joined to that lawsuit and did not default.

END UPDATE.

If Yelp has no legal interest in the reviews posted by its users, on the theory that the users were the sole and exclusive owners of the reviews, it doesn't have standing to fight the decision.

But, that characterization of the interest that Yelp has in reviews posted and aggregated and evaluated by it at its website is dubious. Indeed, the contractual relationship set forth in the Yelp terms of service, in all likelihood, expressly grants Yelp rights in the reviews that are posted by users.

So, Yelp ought to be entitled to fight the claim that the review was defamatory on the merits before an injunction taking it down can be ordered, and the California Supreme Court will have to decide if that is the case.

UPDATE September 22, 2016:
Eric Goldman's lengthy post on the case is here. An update is here. The California Supreme Court unanimously voted to grant certiorari on September 21, 2016.

Transmission of the record, briefing, and oral arguments are likely to follow an ultimate ruling on the merits a year or more in the future.

It also isn't clear what is going on with defaulting defendant Ava Bird, who is being ruthlessly punished for writing a few short negative Yelp reviews. Should she voluntarily consent to remove the review perhaps in a settlement that reduces the money judgment against her, or is forced to do so under threat of contempt of court, or brings her own successful motion to vacate the judgment on some grounds, Yelp's claim could be mooted. If this happens, it isn't clear if that would leave the bad precedent of the California Court of Appeals case in place, if that opinion would be vacated, or if the California Supreme Court would continue to render an opinion on the grounds that the issue might otherwise escape review in almost every case.

Finally, it is not at all obvious that the Plaintiff and former attorney of the defaulting defendant has complied with all of her ethical duties as an attorney by pursuing this course of action. If not, a grievance might be filed that might give rise to additional proceedings.

A few aspects are notable:

* The case involved a client complaining about an attorney.

* The complaint was served by "substitute service" rather than by personally delivering it to the defendant.

* Yelp was not named as a party or joined in the action, so it had no notice of the suit at the time that default judgment was entered.

* An ex parte "prove up hearing" was scheduled and held. It isn't clear if any notice was delivered to the defaulting defendant or received by the defaulting defendant, but the defaulting defendant, at a minimum did not show up at the "prove up" hearing.

* The plaintiff filed court documents filed the court in anticipation of the "prove up" hearing, but not provided to Yelp which also was given no notice of the hearing, there (emphasis added):

In support of its request for injunctive relief, Hassell argued that “once the trier of fact has determined [Bird] made defamatory statements,” the court would have authority to issue an injunction, and that if the same showing could be made at a prove-up hearing, a comparable injunction would be proper. Hassell reasoned that denying injunctive relief after a default prove-up hearing would mean a plaintiff can be forced to suffer defamatory harm so long as the defendant refuses to answer the complaint. Hassell requested that the injunction contain a provision requiring Yelp to remove the defamatory reviews in the event that Bird failed to do so, which was likely in light of her history of “flaunting” California’s court system.

* Yelp received no notice of the "prove up hearing" and did not attend it.

* Following the ex parte "prove up hearing" at which only the plaintiffs attended and of which no transcript is in the appellate record, a default money judgment for "general and special damages and costs" of $557,918.75 was entered, but no punitive damages were entered. This is a pretty stunning award for someone who merely posted a few comments that were allegedly false in a Yelp review online.

* The default judgment also ordered the defaulting party to remove the complaint from Yelp's site. The third paragraph is the "removal order" directed at Yelp:

“Plaintiffs’ Request for Injunctive Relief is Granted. Defendant AVA BIRD is ordered to remove each and every defamatory review published or caused to be published by her about plaintiffs HASSELL LAW GROUP and DAWN HASSELL from [Y]elp.com and from anywhere else they appear on the internet within 5 business days of the date of the court’s order.

“Defendant AVA BIRD, her agents, officers, employees or representatives, or anyone acting on her behalf, are further enjoined from publishing or causing to be published any written reviews, commentary, or descriptions of DAWN HASSELL or the HASSELL LAW GROUP on Yelp.com or any other internet location or website.

“Yelp.com is ordered to remove all reviews posted by AVA BIRD under user names ‘Birdzeye B.’ and ‘J.D.’ attached hereto as Exhibit A and any subsequent comments of these reviewers within 7 business days of the date of the court’s order."

* After judgment was entered, "Hassell served Bird with notice of entry of judgment. Bird
did not appeal, and the judgment became final on March 16, 2014." The judgment was delivered to Yelp the same day that the judgment was served upon Bird (the opinion does not reveal the form of the service).

* Roughly two weeks after the judgment was served and before it was final, the Plaintiff served a demand letter upon the registered agent for Yelp. Yelp responded with a letter to the Plaintiff setting forth its legal position that it was not bound by the order less than a week after receiving the demand letter.

* Yelp allows users to unilaterally remove their own complaints.

* It isn't obvious at first glance that this injunctive relief order was ever served upon the defaulting defendant which is necessary to give the Court authority to sanction the defendant for violating the injunction. The defamation plaintiff could have served the injunction on the defaulting defendant and then held the defaulting defendant in contempt of court if the defaulting defendant did not comply. But, if the defamation plaintiff had tried to compel the defaulting defendant to remove the complaint from the website, the defendant might have made an effort to set aside the default judgment on multiple grounds pursuant to the California equivalent of F.R.C.P. 60 (e.g. bad service of process, excusable neglect, misidentification of party complaining to Yelp).

* There is no indication in the record that the defamation plaintiff to action to compel the defaulting defendant to take action.

* Therefore, after the order was entered and served, Yelp sought to vacate the order, but was not allowed to dispute the merits of the defamation claim, obtained by default.

* The Court of Appeals concludes in the face of case law that arguably says otherwise, that Yelp was bound by the same deadline for attempting to set aside a judgment in the case that applied to the defaulting defendant, even though it was not a party to the case, and that its motion to vacate the order under the court rules (which are statutory in California) was untimely. But, the Court held that it was still allowed to file a motion of a type not specified in the court rules.

* The California Court of Appeals decision is here. It basic conclusions are as follows:

(1) Yelp is not “aggrieved” by the defamation judgment entered against Bird, but it is “aggrieved” 1 Generally, we will refer to respondents collectively, using the singular, gender neutral pronoun form where appropriate. 2 by the removal order;

(3) Yelp has standing to challenge the validity of the removal order as an “aggrieved party,” having brought a nonstatutory motion to vacate that order;

(4) Yelp’s due process rights were not violated because of its lack of prior notice and a hearing on the removal order request;

(5) the removal order does not violate Yelp’s First Amendment rights to the extent that it requires Yelp to remove Bird’s defamatory reviews;

(6) to the extent it purports to cover statements other than Bird’s defamatory reviews, the removal order is an overbroad unconstitutional prior restraint on speech; and

(7) Yelp’s immunity from suit under the Communications Decency Act of 1996 (the CDA), 47 United States Code section 230, does not extend to the removal order.

* In the big picture, one of the real problems is entering a compulsory final injunction against someone who was not a party to the litigation. Generally, only parties to a lawsuit are bound by its decision. There are a couple of exceptions to that idea, but they involve their own due process protections.

For example, in the case of a garnishment for a money judgment, the garnishee can respond that the money allegedly owed by it to the judgment debtor isn't actually owed, but it can't dispute that the judgment debtor owes money to the judgment creditor. The garnishee is also generally required to give notice of the garnishment to the judgment debtor, potentially causing the judgment debtor to seek to set aside the default judgment.

Injunctions directed at a party to a lawsuit can also sometimes have a penumbra effect on some people who have notice of it, although this doctrine is relatively narrow. For example, an officer of a defendant corporation who knows of an injunction entered against a defendant corporation might conceivably be subject to contempt of court for causing the defendant corporation to violate the injunction. A trial court opinion on this subject stated that: "under California
law, an injunction can be “applied to” a nonparty by virtue of its relationship to an
enjoined party. (Citing Ross v. Superior Court (1977) 19 Cal.3d 899, 906 (Ross).)"

* The crux of the appellate ruling against it is as follows:

Yelp attempts to characterize the removal order as an injunction against
Yelp. We do not accept that characterization. The judgment was entered solely against
Bird, and the injunctive order was directed solely at Bird’s defamatory speech.
5
The
removal order was limited to statements covered by that injunction, statements attributed
to Bird which she had been ordered to remove. Thus, the removal order does not impose
any independent restraint on Yelp’s autonomy. Under these circumstances, charactering
the removal order as an injunction creates unnecessary confusion about the clear
distinction between the removal order and the underlying injunction against Bird. For
reasons already discussed, Yelp cannot bootstrap its collateral attack of an allegedly void
5 order into a substantive appeal of the default judgment itself. The question whether the
trial court should have granted an injunction against Bird is outside the scope of this
appeal.

In other words, the California Court of Appeals concludes that Yelp's attack on the order directed at it cannot attack the merits of the determination reached against the defaulting defendant that the statements were defamatory and that a judgment was proper.

Basically, the California Court of Appeals concludes that Yelp is the kind of non-party who can be bound by an injunction because of its relationship to the defaulting defendant, while Yelp disputes that this is the case.